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Finance> Financial system> Ethical Banking Updated: 20 Sep 2018

Data and cybersecurity, keys to generate confidence in a digital bank

Ethics has always been a key debate topic within the financial system. And it still is in the current era of digital disruption that has engulfed a sector that is pivotal for the economy. But, can the banking industry stay up to date with the new frantic pace of innovation and still operate following a series of ethical principles?

In José Manuel González-Páramo’s opinion, in the context of change unleashed by new technologies, the financial sector needs to keep ethics at the core of its banking activity. According to BBVA’s executive director, in the new digital era, banks need start considering confidence as a top priority, and data privacy and cybersecurity as the two pillars on which this confidence is built.

Innovation, however, cannot be left aside. González-Páramo believes in the role of big data as a technology that "fuels" the digital economy, especially in sectors such as finance.  But the way in which these data are collected, analyzed and used raise ethical questions, particularly regarding data protection and safeguarding consumer confidence.

The financial sector needs to keep ethics at the core of its banking activity

Big Data: the value of data

BBVA’s executive director believes that big data technologies will have far reaching implications for all players in the financial sector, whether traditional institutions, new fintech startups or internet giants. Indeed, new analysis techniques will allow not only to improve risk profile assignment and fraud prevention processes, but to predict behaviors and identify trends.

Also, access to big data will enable new levels of internal process automation and enhance data-based decision making procedures, he added. In his view, by knowing their customers better, banks can anticipate their needs and offer better advice, products and services, at the right time.

But many consumers remain unaware of how valuable their data are. They appreciate the fact that they can enjoy some of the most popular online services - social networks, search engines and applications – for free, or paying only for specific services, when, in exchange, what they are doing is handing over their data, many times without even realizing it. In this sense, it is worth highlighting how important user digital literacy is.

Confidence, the cornerstone of the digital economy

Protecting the new source of wealth that big data represents is key for the digital economy. For BBVA’s executive director, head of the regulation area, there are several factors that need to be taken into account. In first place, that the right to privacy is inalienable. Second, that confidence has to be the keystone not only for the banking sector, but for the digital economy as a whole. To the extent in which these data collection and management techniques grow in scale, the increased risk of having security incidents will also put consumer confidence at risk.

Confidence has to be the keystone not only for the banking sector, but for the digital economy as a whole

Thus, to make the most out of the available datasets, companies need earn customer confidence through two pillars: data privacy and cybersecurity. These two pillars will help customers in their decision making processes and improve the confidence in the banking sector, allowing institutions to accompany their customers in their digital future. Also, BBVA’s executive director considers regulator involvement to be essential in this respect. However, regulation alone is not enough: it has to come with a responsible behavior by internet users.

BBVA’s executive director believes that financial institutions have already made huge efforts to reach the highest levels of data security and to educate their customers in the best security and privacy practices. However, to guarantee customer protection and maintain the level of excellence achieved, authorities need to establish the same security requirements for financial service providers.

In his opinion, equal ground rules for everyone must be based on international standards that ensure interoperability between countries, while remaining flexible to adapt to market changes and protect against new forms of fraud.

González-Páramo also discussed the benefits of a nascent subfield of big data: the so-called “data philanthropy,” a form of collaboration in which private sector companies share data for public benefit. The initiative launched in 2016 by UN Global Pulse and BBVA’s Global Data Analytics, a project that uses card payment data to measure economic resilience in areas affected by natural disasters, is a good example of this.